FLORIDA DEPARTMENT OF EDUCATION

STATE BOARD OF EDUCATION

GARY CHARTRAND, Chair ROBERTO MARTNEZ, Vice Chair

Pam Stewart Commissioner of Education

Members
SALLY BRADSHAW AKSHAY DESAI, M.D. BARBARA S. FEINGOLD JOHN R. PADGET KATHLEEN SHANAHAN

Randall W. Hanna, Chancellor The Florida College System

October 3, 2012 Dr. Steven R. Wallace President Florida State College at Jacksonville 501 West State Street Jacksonville, Florida 32202-4076 Dear Dr. Wallace: As you are aware, the most recent operational audits for Florida State College at Jacksonville included findings relating to Full-Time Equivalent (FTE) reporting for Continuing Workforce Education (CWE) courses (Report Nos. 2010-168 and 2012-073). Both findings indicate that the Colleges reporting of CWE FTE enrollment may have been in conflict with Florida Statutes and State Board of Education rules. The audit reports note the College reported revenues from two Naval contracts (Great Lakes and Pensacola), as well as other external agencies and companies, that exceeded the direct cost of instruction for the CWE programs. The Auditor General recommended the College consult with the Florida Department of Education (Department) to determine the corrective action necessary to the FTE reported for CWE programs for the 2006-07 through 2009-10 fiscal years. Sections 1011.80(5)(d) and 1011.84(1)(f), Florida Statutes, provide that when a public institution has been fully funded by an external agency for direct instructional costs of any course or program, the FTE generated shall not be reported for state funding. Further, State Board of Education Rule 6A-14.054(7), Florida Administrative Code, provides that each board of trustees shall have the authority to negotiate tuition fees for courses and programs contracted by external agencies and companies that vary from the tuition fees provided for in this rule.

325 W. GAINES STREET TALLAHASSEE, FL 32399-0407 (850) 245-0505 www.fldoe.org/cc

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Such negotiated fees may exceed the full cost of instruction; however, the courses and programs of instruction funded from these negotiated fees shall not be reported for State funding purposes. The Colleges position, as shared with us by staff, is that the naval contracts were fixedprice contracts with indefinite quantity and indefinite delivery requirements, essentially at risk types of contracts. The College believes the element of risk should negate the review of reported CWE enrollment based on an after-the-fact determination as to whether the contract generated revenues sufficient to cover direct instructional costs. In order to fully understand the position of the College, we asked that you provide a detailed memorandum explaining the legal analysis. The Office of General Counsel of the Department has reviewed this memorandum and have informed us that they do not believe the statutory and administrative rule language relevant to this case supports the position being taken by the College. The College also provided data indicating that the contracts did not cover the full costs of offering these CWE contract courses. The College indicated they essentially lost money on these contracts because indirect costs, including billing and accounting, legal services, HR services, purchasing and contracting, and IT costs were not covered. We reviewed the additional items proposed by the College to be included in this calculation. A review of the statutory and administrative rule language and the Florida College System Accounting Manual only refer to direct instructional costs. Therefore, based upon the accounting manual and advice of the Office of General Counsel, these costs should not be included in the calculation. The Auditor Generals position appears to be that none of the CWE FTE should have been reported for state funding purposes because the total revenues collected for CWE exceeded the total direct instructional costs for CWE programs. However, the statutory and administrative rule language both speak to covering costs for a course or program. In the Colleges response to the initial finding, the College indicated that some of the CWE courses showed a surplus of revenues over direct instructional expenditures and others did not, thus providing the distinction needed to determine which CWE-related FTE were correctly included in FTE enrollment reports and which will need to be adjusted. Based on information provided by the College, it appears that a portion of the CWE FTE reported for state funding was reported correctly and a portion was not. We believe based upon our review of the statute and rules, that the CWE FTE reported for the Pensacola Naval program and all but one of the on-campus programs were correctly reported for state funding purposes. The CWE FTE reported for the Great Lakes Naval program and the on-

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campus Fire Academy program do not appear to meet the statutory requirements for FTE reporting purposes. Based on the analysis above, the detail provided below and the advice from the Office of General Counsel of the Department, we believe that a total of 6,593 FTE were incorrectly reported over a four-year span of time from 2006-07 to 2009-10. We have incorporated a table with the applicable information below. We understand that your attorneys take a different position.

The institutions within the Florida College System are not funded on a strict enrollment basis and in many recent years, the colleges received a reduction in state revenues based upon the overall size of the budget of the colleges. However, in one year in question, the institutions within the Florida College System did receive additional state funding. The decision whether to adjust the FTE calculation and any action regarding funding levels for the college is a legislative determination.

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We are forwarding our conclusions to the Florida Legislature and the Legislative Enrollment Estimating Conference to take action they deem appropriate. Because your attorneys take a different legal position, you may elect to provide your analysis to them. While a specific date has not been selected, we understand that the Enrollment Estimating Conference is scheduled to meet in late October. We will inform you of the specific dates of the meeting. By copy of this letter, I am informing the Auditor General of our position on this issue. Please call me if you have any questions. Very truly yours,

Randy Hanna Chancellor RH/ Cc: Office of the General Counsel, Department of Education Mr. Doug Martin, Auditor General Ms. Gwendolyn Yates, Chair, Board of Trustees, FSCJ Mr. Steve Bowers, VP of Administrative Services, FSCJ